Lincoln Financial in settlement talks with ex-agent who sued over FIA returns

Lincoln Financial is being sued by an ex-agent, and his clients, who say the FIA they bought did not perform as expected.

By John Hilton

Lincoln Financial is in settlement talks with nine plaintiffs – including an ex-Lincoln agent – who allege that the insurer misrepresented the potential returns with its OptiBlend fixed indexed annuity.

Former agent Henry Morgan and eight other plaintiffs, all Morgan's clients, signed FIA contracts in February 2020, court documents say. Plaintiffs say Lincoln led them to expect the consistent 6% gains illustrations showed.

Their lawsuit seeks class-action status and is filed in the Northern District of Texas. Plaintiffs are suing both Lincoln and Fidelity Product Services, provider of the index upon which the Lincoln OptiBlend FIA is linked. Lincoln and Fidelity filed motions to dismiss.

In the meantime, settlement talks are under way, with the parties agreeing to consider written settlement offers by Aug. 1, according to a status update filed Wednesday.

The update sets out a court schedule that ends with a trial date of April 7, 2025. The discovery phase, the initial disclosure included, is delayed until Dec. 18, 2023.

Sheryl Moore, CEO of both Moore Market Intelligence and Wink, Inc., does not think those dates will be needed.

"Insurance companies have a record of settling disputes, whenever possible," she said. "No one likes to see their name in lights with a class action lawsuit. No doubt the Lincoln case will not make it to court."

Illustrations used to sell FIA and indexed universal life insurance have been subjected to several lawsuits, with mixed results. Industry analysts and many regulators agree that illustrations are problematic and unrealistic.

Lincoln Financial: buyer beware

The lawsuit claims a Lincoln marketing consultant "made several oral representations to Henry Morgan and, on information and belief, made the same misrepresentations to other brokers, agents and customers, that when the market was no longer in the bull direction a return would still be generated because of the dividend stock mix in the index."

In its response, Lincoln claimed the marketing information referenced in the lawsuit was emailed to Morgan and other Lincoln agents and marked, “For agent use only. Not for use with the public.”

"Thus, the alleged misrepresentations are not actionable," Lincoln attorneys wrote. "For the same reason, the oral representations ... allegedly made to Morgan, other agents, and brokers are not actionable."

Lincoln noted that all of the plaintiffs signed an application in which he or she acknowledged that “all payments and values provided by the contract, when based on experience of the index Account, are not guaranteed as a dollar amount.” Also, the Annuity Disclosure Statement, which
each Plaintiff acknowledged reading, stated that if the “percentage change [was] negative” for the AIM Index, there “w[ould] not be any interest credited for the term.”

In that part of its response, Lincoln claimed Morgan, as a licensed agent representing the company, possessed a greater knowledge than most about how the FIA and index work, and how to read disclosures and understand what the words mean.

Consumer advocates say disclosure language is hard to understand and often ignored by buyers.

InsuranceNewsNet Senior Editor John Hilton covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.

InsuranceNewsNet Senior Editor John Hilton has covered business and other beats in more than 20 years of daily journalism. John may be reached at [email protected]. Follow him on Twitter @INNJohnH.